WEB SEMINAR Q&A: What will drive minor metals prices in 2019?

Fastmarkets’ minor metals team answers some of the key questions raised during our recent web seminar, discussing recent market trends in minor metals, and the factors expected to drive price moves in 2019.

If you missed it, follow this link to listen to the free recording.

Has smuggling affected any other metals apart from antimony? Is it only antimony that is being smuggled?
It is not only antimony that is being smuggled through the illegal channel at the Chinese-Vietnamese border. There were five rounds of government operations against smuggled goods last year and more than 700 suspects were arrested. In the latest crackdown in December, more than 90,000 tonnes of goods were confiscated, including not only antimony but also waste plastics, slag as well as some exported ferro-silicon.

But since the proportion of antimony that is being smuggled is the most significant compared with other markets, the effect on prices is most evident. For example, around 93% of Chinese antimony imported into the European Union was not included in China’s customs data during January-June period in 2017.

You haven’t mentioned Fanya stocks at all. Do you expect it to have any effect on minor metals price this year? What is going to happen with the stocks held at Fanya’s warehouses?
Until the case against the failed Chinese Fanya Exchange is completely resolved, the uncertainty surrounding the release of the inventories will of course continue to weigh on minor metals markets. Last year, concerns over the vast minor metals stocks the exchange holds re-emerged following the summer trial of suspects involved in the exchange. A verdict is yet to be made by the court with the questions of just how the investors will be paid back or how the stocks will be dealt with still looming over the market.

According to our market sources, there are two potential scenarios. 

  • The government will either put the stocks on auction or sell them to one or a couple of major players, and/or… 
  • Fanya’s more valuable metals, such as indium, gallium and germanium, could be bought by China’s State Reserve Bureau (SRB), for strategic stockpiling.

There remains a third option that no announcement will be made, and the Fanya stocks will be released to the market quietly over a longer period of time.

Whatever the case may be, market participants believe that the stocks of minor metals will be locked in the exchange’s warehouses until the end of the legal proceedings, which is not expected to come any time soon.

Have you looked at the effect of tariffs on the cobalt market?
Yes. In effect, tariffs on US imports of Chinese cobalt are likely to mean a shift in trade flows, and regional discounts and premiums for certain shapes and brands of metal while that happens. But in fact, as with some of the other minor metals markets, the cobalt market shifted last summer in anticipation of tariffs being introduced: Chinese suppliers with long-term agreements to supply US customers attempted to ship all cargoes under 2018’s long-term contracts to the US ahead of September.

How would a no-deal Brexit affect Reach?
The UK government published in September additional documentation on how the UK will manage chemical regulation if it is no longer part of the European Union’s Reach (Registration, Evaluation, Authorization and Restriction of Chemicals) legislation. According to this information, If the UK withdraws from the EU without a deal, the UK plans to replicate EU Reach in the form of a UK Reach. In this scenario, UK companies will need to transfer registrations to an EU company to continue to have access to the EU market. The UK and EU regulatory agencies would operate independently, which means that companies will have to register the same chemicals independently with both agencies.

Similar fees would exist for applications made under UK Reach as in EU Reach. Companies currently holding EU Reach registrations will have 60 days to submit basic data and two years to submit the full data package to register chemicals under UK Reach. More information can be found at ECHA’s new web page specifically created to help companies prepare for Brexit. First and foremost, it advises companies to identify their role in the supply chain and future connections to the EU27 and the European Economic Area (EEA) market.

Which minor metals have potential for growth?
According to our market sources, we might see an uptrend for germanium due to an increased demand for optic fiber that is complementary to the 5G revolution. According to various European sources, Chinese producers “got tougher” on raising their offers on long term contracts. There is also robust demand from aerospace sector, where rhenium is used in high-temperature superalloys. Also, the solar panel industry is quite healthy, with cadmium telluride – a type of thin film solar cells- earning the biggest market share and competing mostly with silicon. This is indeed a very interesting market, and much has been talked about the lack of tellurium availability to meet the solar demand in two years’ time. However, with the current market dynamics there is a resistance for prices to rise and it seems like, for now and at least for this year, supply can easily meet demand, hence market participants are not expecting prices to rise soon.

How do you think the vanadium market will fare in 2019?
Vanadium prices have come off their all-time highs and fell heavily in the last weeks of 2018. They have since slightly recovered and stabilized and their future trend largely depends on market moves in China, to which European prices typically respond. In the run-up to the Chinese New Year, any drastic move higher is unlikely, meaning any further recovery in international prices is also unlikely. The outlook for vanadium remains optimistic in a market that has structurally shifted since its 2015 lows: China’s environmental inspections have taken material offline, while changes to rebar standard should mean robust consumption from the steel sector.

How is freight cost vs the specification on pricing handled? Currently the price is based in Rotterdam. What about fob China or fob Hong Kong or Korea/Japan?
Where possible, we would normalize the data we receive. For example, a delivered price would be netted back to an in-warehouse price, if it matches the delivery window.

Fastmarkets has clear specifications for all the price points that it covers. Our specifications detail the material’s characteristics or quality, location, incoterm, payment terms and the minimum volume accepted.

These specifications are determined in consultation with market participants and follow industry convention.
Reporters ensure that the information they receive matches these specifications and inputs outside these specifications are discarded.

To see all Fastmarkets pricing methodology and specification documents go to https://www.metalbulletin.com/prices/pricing-methodology.html.

Why did you change minimum tonnages for some minor metals and not others?
We carried out informal discussions with some key market players in each of the minor metals markets where we were considering changing minimum tonnages, to get initial market feedback. We combined this initial feedback with our own analysis of two years’ pricing data extracted from our proprietary database MInD (the Markets Information Database). The former enabled us to identify initial market support for minimum tonnage changes while the latter clarified the value in doing so (that is, ensuring our price assessments are robust and representative).

This process was followed by a formal consultation with a greater number of market participants. For those markets where we changed minimum tonnages (indium, gallium, germanium and germanium dioxide), we had both market support for a change, and had identified that a minimum tonnage increase could increase the robustness and representativeness of our assessments.

Prior to this process, certain market participants had drawn our attention to what they saw as a change in typical spot market transaction sizes. We regularly review specifications for all our price assessments and since market conditions do change we welcome similar observations about other markets.

Click here for further details about the market consultation process.

Would you ever decrease your minimum tonnages for any of your metals price assessments?
Yes. Our specifications are regularly reviewed to ensure that they reflect typical spot market practice. While we did not reduce minimum tonnages for any of our minor metals prices in this round of reviews, we decreased the minimum tonnage for our benchmark in-warehouse Rotterdam ferro-tungsten price assessment late last year. In this case, the spot market for larger volume deals has become smaller in recent years because mills have been committing more of their requirements to long-term contracts. As a result of this and following a market consultation we decreased our minimum tonnage from 5 tonnes to 3 tonnes in November last year.

If you have any other questions arising from the points covered in the web seminar, please send them to Ewa Manthey at ewa.manthey@fastmarkets.com.